In the final day of a trial to determine if Stockton, California, is ready to end its two-year journey through chapter 9 protection, the city argued that its plan to handle its liabilities to creditors, public workers and the state's pension fund was fair and equitable, Reuters reported yesterday. The trial's proceedings yesterday, plus the four days of hearings in May, mainly focused on the Northern California city's holdout creditor — two funds managed by Franklin Templeton Investments — which the city has proposed offering less than a penny on the dollar. But the $3.7 trillion municipal bond market is closely watching this trial for an additional reason: to see how the court handles the treatment of pension obligations, which the city has proposed leaving untouched. Last month, U.S. Bankruptcy Court Judge Christopher Klein said that he would venture into largely untrodden territory to determine whether the country's largest pension fund, the California Public Employees' Retirement System (CalPERS), could be forced to take a loss as other creditors do in municipal bankruptcies. The city, its retirees and CalPERS yesterday presented a united front in urging the judge to leave pension obligations alone in his ruling.
